The connections between political science and world markets are often overlooked, said Dr. Ian Bremmer, president of the Eurostar Group, at a CPBI Forum 2008 presentation on Wednesday. “Wall Street doesn’t hire political scientists,” he noted. “That would be fine—except for the fact that in today’s markets, politics are increasingly playing a role.” He believes that these new drivers create new winners and losers from an investment perspective.
Examining issues ranging from global energy production to weapons technology, Bremmer drew links between countries’ political risks and structures and their long-term economic sustainability. He believes that emerging markets—which he defined as places “where politics matters at least as much as economics to market outcomes”—are where we’re seeing the most growth. In particular, he was positive about Brazil, suggesting that it will outstrip China in terms of growth over the next five years.
Bremmer also set out to debunk some common investor myths. He believes that some of the places typically viewed as higher risk—such as Pakistan, North Korea and China (due to concerns about Tibet)—aren’t as unstable as the media represents them as being. Conversely, he believes that countries such as Iran, Iraq, Russia and India may have political issues and associated risks that should dictate caution for investors.
Looking closer to home at the situation in the U.S., he predicted that Obama will win the upcoming election (with the caveat that it may be too soon to tell). He believes that this result will be negative for domestic markets, but better for foreign policy. Regardless of the election outcome, the fact that the U.S. is arguably in a recession is having a significant impact on world markets. “All of this is happening in the context of an environment where the U.S. has less political will and less political capacity to do the heavy lifting,” he added.
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